Greece's economic collapse could have parallels in Kenya

Some of the causes of Greece's economic collapse are present in Kenya today – could the same thing happen there?

ByOry Okolloh, Guest bloggerSeptember 29, 2010

A construction worker erects scaffolding on a new bridge along the Nairobi-Thika highway project, under construction near Kenya's capital Nairobi, on Sept. 13. The road, which is being built by China Wuyi, Sinohydro and Shengeli Engineering Construction group, is funded by the Kenyan and Chinese government and the African Development Bank (AFDB). The project will cost 28 billion Kenyan shillings ($330 million), according to the Chinese company.

Johannesburg, South Africa — I’ve just finished reading a fascinating article in Open Democracy about the collapse of the Greek economy and what it will take to fix it. While Greece and Kenya are fundamentally different countries, I was struck by how well the author unpacked the underlying dysfunction of Greece as a country and an economy and how some of the issues apply to the Kenyan economy today.

Don’t have anything clever to add to the article’s analysis, just want to point out the things that stood out for me.

In a small-scale economy households make different choices from those in an economy of salaried employees and large organizations. The family will seek stability in polyergy: in having varied sources of income, as many as it can find and appropriate.

How many Kenyans do we know who have a side hustle? Banker by day, butchery/hair salon owner by side…. Even during the times we have experienced growth – it’s been a false growth, barely any trickle-down (hence Kibaki and his cronies shock in ’07 when his re-election wasn’t guaranteed based on economic growth).

In a small-ownership economy household saving and investment is also different. It is channeled, quite rationally, into real estate and into education. In western economies savings are invested collectively through pension funds, mutual funds and bank deposits. They end up funding industry, technology, infrastructure, and in general, sizeable organizations. In the Greek micro-economy monetary savings have few reliable collective outlets.

Cue the ubiquitous Kenyan dream of owning a plot and investing in your kids education. NSSF is widely regarded as a rip-off, and other forms of investment and saving (e.g. stock market) are only taking hold fairly recently.

And does this sound all too familiar?

But clientelism and favoritism have been inherent in the modern Greek state since its inception, and the state has always been a major player in the economy. Distributing political rents was a necessary means of legitimation of politicians in the eyes of the electorate, and harvesting rents was a major egoistic reason for becoming a politician.

And wonder why we don’t hear of enough success stories from Kenyan entrepreneurs – very few can tell the story of how they got from A to point Z without some murky stories or connections in the middle – usually related to government connections or at minimum great skill at navigating the political rent space. Try pitching your open source solution to a government official, unlikely to move anywhere because no fat budget attached.

Business strategy: if businesses can make high profits from government contracts or from other privileges, they will invest more to gain the privileges than to become competitive in an open market. Over time this distorts their whole mode of operation: a good salesman is one who can build personal relationships with bureaucrats, a good engineer is one who can draw out a project to make it more expensive. It is rare for a state-dependent enterprise to be also competitive. This was true for the big so-called ‘national suppliers’, as well as for the small I.T. companies, in which many bright engineers wasted their youth working on useless R&D projects funded by EU Programmes.

And finally, I think this captures the essence of why I think it is – generally – tough to transition big/large scale companies successfully in Kenya and to translate the innovation that we see all around into tangible (profitable) businessess – we work hard, but are loathe to collaborate, because someone inevitably stabs you in the back and there is no penalty – legal or social (as in they’ll be catching pints next to you in the bar a week later as if nothing happened). So most of that innovation and entrepreneurship bubbling around either doesn’t transcend the individual or the small scale – you cannot grow in an environment that lacks trust or that is full of what the author calls low-trust opportunism (I am so adapting this phrase!).

Maybe Greeks will work as hard as westerners when given the same set of choices; but they will not collaborate as well. In game theory an opportunist is one who grasps the chance to make a good profit today, even if that may have negative repercussions tomorrow. Usually, he will break a rule or spoil a collaboration to make the ‘grasp’ (αρπαχτή – ‘arpachti’, from the verb αρπάζω, to grasp).

The Christian Science Monitor has assembled a diverse group of Africa bloggers. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here.